QBE swings to profit as premiums surge

QBE has reported a $US750 million ($1.04 billion) net profit compared with a $US1.52 billion ($2.11 billion) loss in the previous year after strong pricing and a surge in gross written premium (GWP) offset catastrophe claims impacts.

The result was the first to be delivered under new CEO Andrew Horton who aims to establish QBE as a “consistently high-performing enterprise” following the yearly ups and downs of the past.

“We have delivered a good result, let’s celebrate that, and now let’s think through how to deliver that sort of result again and again and again, and that will deliver benefits to everybody who deals with the company,” he told insuranceNEWS.com.au today.

Mr Horton, who took up the role last September, says after a period of change in previous years the remediation work at QBE has been largely completed, and the latest result provides a strong platform from which to build.

QBE’s combined operating ratio improved to 93.7% compared with 104.2% in the previous period when it was significantly impacted by covid claims and adverse prior accident year claims development.

The Australia Pacific combined operating ratio improved to 91.4%, for International it was 90.6%, while the North America the ratio improved to 102.9% from 112.7%.

GWP grew 22% to $US18.46 billion ($25.65 billion), with renewal premium rates increasing an average 9.7% across the group. The adjusted cash profit return on equity was 10.3%.

Mr Horton says the company in Australia has the opportunity to leverage its strong brand and across the group’s regions it will look to grow in areas where it has competitive advantages and can achieve strong margins.

“My preference would be for organic growth, looking at the footprint we have got and seeing if we can launch products we have in one division in another division, looking at whether we can grow our particular footprint in any of the three regions we are in, or think of products that are complementary where we can go and recruit individuals or teams of people,” he said.

Catastrophe claims for the year rose to $US905 million ($1.26 billion) or 6.6% of net earned premium, up from $US688 million ($955.9 million), or 5.8% in the prior year, and 0.9% above the group’s increased allowance.

Events included Winter Storm Uri, Hurricane Ida, Storm Bernd, Cyclone Seroja and widespread flooding and storm damage in Australia.

Mr Horton says rising global catastrophe losses are an issue for the industry, while in the Australian context it is too early to comment on likely benefits from the proposed cyclone reinsurance pool.

“The concept of a government-industry approach is a good one,” he said. “But I would like to see it over the short-to-medium term to know how it is going to work.”

QBE forecasts GWP growth is likely to be in the “high single digits” this year.

“Following another year of elevated natural catastrophe claims costs alongside rising inflationary signals and continued low interest rates, the industry operating environment remains highly uncertain. Because of this, the premium pricing environment is likely to remain positive in 2022,” Mr Horton said.